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nonmonetary assets and liabilities

In the process of translating foreign-currenecy denominated assets and liabilities into a firm’s functional currency, non monetary items are foreign-exchange denominated physical assets such as inventory and fixed assets that cannot be easily converted into cash or cash equivalents.

By contrast, monetary assets and liabilities are items that represent a claim to receive, or an obligation to pay, a fixed amount of foreign currency units. In the monetary/non monetary method of translation for the balance sheet, monetary items are translated at the current rate, while non monetary items are translated at historical rates.